We Think Sumisaujana Group Berhad (KLSE:SUMI) Can Stay On Top Of Its Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Sumisaujana Group Berhad (KLSE:SUMI) does carry debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Sumisaujana Group Berhad Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Sumisaujana Group Berhad had RM28.4m of debt, an increase on RM24.3m, over one year. But on the other hand it also has RM91.8m in cash, leading to a RM63.4m net cash position.

How Healthy Is Sumisaujana Group Berhad's Balance Sheet?

The latest balance sheet data shows that Sumisaujana Group Berhad had liabilities of RM52.9m due within a year, and liabilities of RM14.1m falling due after that. On the other hand, it had cash of RM91.8m and RM82.3m worth of receivables due within a year. So it actually has RM107.1m more liquid assets than total liabilities.

This luscious liquidity implies that Sumisaujana Group Berhad's balance sheet is sturdy like a giant sequoia tree. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Sumisaujana Group Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Sumisaujana Group Berhad

Shareholders should be aware that Sumisaujana Group Berhad's EBIT was down 92% last year. If that decline continues then paying off debt will be harder than selling foie gras at a vegan convention. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Sumisaujana Group Berhad can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Sumisaujana Group Berhad may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. In the last three years, Sumisaujana Group Berhad's free cash flow amounted to 49% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Sumisaujana Group Berhad has net cash of RM63.4m, as well as more liquid assets than liabilities. So we don't have any problem with Sumisaujana Group Berhad's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 2 warning signs for Sumisaujana Group Berhad that you should be aware of before investing here.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.